Externality

Yew-Kwang Ng ()

Chapter 7 in Welfare Economics, 2004, pp 144-163 from Palgrave Macmillan

Abstract: Abstract It was noted in Chapter 2 that an equilibrium situation of a perfectly competitive market economy is Pareto optimal under certain conditions. One of these conditions is the absence of (unaccounted for) external effects. However external effects are pervasive. External effects in the form of environmental disruption have attracted both academic and public attention for decades (see for example Papandreou, 1994; Stavins, 2000). This chapter considers how external effects can cause non-optimality, and how this can be alleviated. But first we shall discuss the concept and classification of external effects.

Keywords: Transaction Cost; Welfare Economic; External Effect; External Cost; Bargaining Solution (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-4039-4406-1_7

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DOI: 10.1057/9781403944061_7

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